Better Money Habits in 3 Easy Steps

According to Charles Duhigg author of The Power of Habit, our brains have a 3-step process for forming a habit:

Cue - a trigger that activates an action or routine

Routine - an action or response we’ve learned to do that gives us access to a predictable reward

Reward - something our brain craves.

The key to forming a habit is through repetition. Then after enough repetition, actions and routines become automatic. There’s no more thinking required from our part...we just DO.

We’ve picked up many habits we’ve observed and learned over the years...

But how many of these habits were intentional?

How many were accidental - those habits we had no control over and were the result of the situation we were in at that time?

Can we create new habits that we want?

And can we break old habits we no longer want?

Let’s explore...

Create Habits You Want

If life is about growth, then it’s never too late to learn something new.

I took French immersion for 4 months and stayed at Sainte-Anne’s University a few years ago. I chose Sainte-Anne because of their reputation. Their immersion program is well-known to be effective because of this one strict rule: students are to speak ONLY French during their whole stay on campus. After 3 strikes, you’re out of the program - no refunds!

I was in my mid-twenties and I thought I was getting too old to learn a new language. But then I met my 80 year old neighbor, Shirley. Our rooms were next to each other. Shirley did not speak a lick of French before coming to Sainte-Anne.

She struggled with French. But did that stop her? NO - because she was thrilled to be there. Fueled with unwavering determination, Shirley only spoke in French over the next few months.

If Shirley can train her brain to learn a new language at 80, then surely we can learn to create smart money habits now.

How are habits created?

“The craving brain” drives habits, according Charles Duhigg. A habit is formed when we crave a specific reward after being exposed to a cue or a trigger.

I’ll use my toddler boy as an example. My 2-year old hates blowing his nose whenever he has a cold. But if he doesn’t blow his nose, the pressure from that mucus build-up leads to an ear infection. So, the doctor prescribes flavoured kid’s antibiotics which he happens to love. In other words: there’s no reward for him to blow his nose. But there is a reward when he doesn’t.

What’s a mama to do to break this cycle - and prevent another ear infection (and more antibiotics)?

Cue (trigger) - my toddler catches a cold and his nose if stuffed

Routine (action) - I ask my toddler to blow his nose multiple times until it’s cleared

Reward - my toddler is offered a very tiny piece of dark chocolate after successfully blowing his nose

Is this bribery? I wonder that same thing myself. And maybe it is. But I prefer to call it (positive) conditioning. I’m helping my toddler know that blowing his nose is a pleasant experience. (And btw, it’s a small piece of 70% dark chocolate - so it’s actually pretty healthy.)

The reward doesn’t have to be big. It just needs to be pleasant enough so our brain can crave it. In my toddler’s case, it’s the unusual (good) taste of a dark chocolate.

#1) Start with the end in mind: define your reward

Are you saving for something specific? What is it - and WHY is that thing important to you?

What happens when you accomplish that specific goal? How does that change your life?

Be crystal clear and ultra-specific when you define your rewards.

#2) Then step back and set your cue

Cues serve as a reminder (a trigger) that we need to take action in order to get our reward.

Cues are things that we see, touch, smell, taste or feel.

If you’re saving money towards a house downpayment. A visual cue you can create is a picture of your dream home on your fridge so you can see it multiple times a day to remind you what you’re saving for.

You can also write down how much you want to save, and how much you’ve saved so far. The key is that you display this somewhere you can see everyday. Maybe multiple times a day so that it can serve as your cue/trigger to save money.

If you’re saving towards that dream vacation. Another visual cue similar to the above can work…

#2. Know where your money is going on a regular basis

Make tracking your spending part of your routine and regularly review if you’re meeting your saving goals. Schedule this in your calendar bi-weekly. The reminder that pops up can serve as your cue.

To help, you can try our free budget template that lets you track your income and spending on a monthly basis.

Having a routine that keeps your true financial picture in sight gives you increased confidence and reassurance that you’re on the right track.

#3. Take advantage of reduced prices and stock up

Make it a routine to stock up on non-perishable items whenever they’re on sale. Not only do you save money, you also save time on repeat trips to the store. Here are a few non-perishables that are good for stocking up: